FED CUTS KEY INTEREST RATE
The Federal Reserve Board’s Federal Open Market Committee cut its short-term interest rate by a half of a percentage point today to 4.75 percent.
According to the committee, the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally.
The committee said today’s rate cut is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
The cut to the federal funds rate is the first since June 2003.
In a related action, the Board of Governors also unanimously approved a 50-basis-point decrease in the discount rate to 5.25 percent. The discount rate is the rate banks pay to borrow directly from the Federal Reserve.
Source: federalreserve.gov
Read MorePUBLIC NOT BUYING HOUSING ‘CRISIS’
Despite media reports that the housing market faces imminent collapse, a study released this week shows consumers are confident real estate values will remain solid even if mortgage rates increase.
Three-quarters of respondents to ING Direct’s most recent homeowner study said they had very little concern about the future value of their homes. The study is based on a national survey conducted by Synovate, a global research firm.
Most survey respondents (85 percent) believe their homes increased in value during the last three years. While homeowners felt their homes have increased in value by approximately 6 percent in the last year, they only expect values to increase by about 4 percent in the next 12 months.
Real Estate Center Chief Economist Mark Dotzour said the survey shows many Americans are smart enough not to believe everything they see on television, such as media reports that a housing bubble is about to burst.
Dotzour said that not only is the housing market not tanking, but home price appreciation is a red-hot 12.54 percent for the entire nation.
“This is still extraordinary price movement,” he said. “You have to go back to 1979 to find this level of appreciation prior to the current boom.
“While the nation’s inventory of unsold homes was six months in April, homes typically continue to increase in value when inventories are at this level. Texas inventory levels are lower than the national average. With a five-month inventory, Texas homes are likely to continue their recent appreciation trends.”
Source: RECON
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